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Jose Gonzalez, Individually and On Behalf of All Others Similarly v. Preferred Freezer Services Lbf


September 27, 2012


The opinion of the court was delivered by: Hon. Otis D. Wright, II United States District Judge



Plaintiff Jose Gonzalez moves for corrective action under Federal Rules of Civil Procedure 23, on grounds that Defendant Preferred Freezer Services has improperly contacted potential plaintiffs to this putative class action in efforts "to obtain releases from its employees concerning the claims pled by [Gonzalez] in this action." (Mot. 6.) As a result, Gonzalez asks the Court to order Preferred Freezer to release the names and contact information of individuals from whom Preferred Freezer has attempted to extract releases. (Mot. 13.) For the following reasons, the Court GRANTS Gonzalez's motion.*fn1

Gonzalez brought a collective action on behalf of himself and other of Preferred Freezer's employees for unpaid overtime pay under California law and the Fair Labor Standards Act, 29 U.S.C. § 216(b). (Mot. 2.) In August 2012, Preferred Freezer unilaterally drafted a "Release Agreement" that it provided to its employees, who are potential plaintiffs to this putative class action. (Mot. 6--7.) The Agreement explained that in exchange for a settlement payment "in full satisfaction of all claims that Employee has, had or could have had arising out of the lawsuit or in any way related thereto," the employee waived any and all claims arising out of a "former employee['s]" wage-and-hour lawsuit or in any way related to the lawsuit. (Mot. 7.) But the Release Agreement did not state when this unnamed lawsuit was filed, the name of the former employee, the names of the employee's attorneys, the attorneys' contact information, or the period of time covered by the release. (Id.)

Settlements are usually encouraged; however, public policy demands that potential plaintiffs receive appropriate notice before entering into any release agreement. County of Santa Clara v. Astra U.S.A., Inc., No. C 05-03740 WHA, 2010 WL 2724512, at *3 (N.D. Cal. July 8, 2010). While pre-certification communication with prospective § 216(b) plaintiffs is generally allowed, courts may issue a corrective order when "defendant's communication was misleading or improper." Parks v. Eastwood Ins. Services, Inc., 235 F. Supp. 2d 1082, 1084 (C.D. Cal. 2002). The concern, of course, is that a defendant could mislead putative class members through "omissions and failure to provide enough information, which can include the failure to append the plaintiffs' complaint to a settlement offer." County of Santa Clara, 2010 WL 2724512, at *3. As a result, if the Court finds that Preferred Freezer's actions could mislead potential plaintiffs, then the Court can order a corrective action to rectify Preferred Freezer's action.

The waiver Preferred Freezer tendered its employees was misleading in many ways. It did not include any information regarding this class action, except that a former employee had brought a lawsuit against Preferred Freezer. (Sinay Decl. Exs. A, B.) The waiver did not attach the Complaint, any information on when the case was filed, nor any information regarding the essence of the case. (Mot. 7.)

Preferred Freezer also did not include Gonzalez's counsel's contact information. (See Gamez Decl. Ex. 1.) Even when Preferred Freezer's agents spoke to the potential plaintiffs, the agents never provided them with the name of the case. (Gamez Decl. ¶ 6.) Furthermore, Preferred Freezer's counsel never contacted Gonzalez's counsel to confer over possible communication to Preferred Freezer's employees regarding the potential settlement. (Mot. 6.) Thus, the waiver misleadingly failed to provide the potential plaintiffs with adequate notice of this case in order to make an informed decision regarding waiver of their rights.

Gonzalez seeks only a list of all employees (and their contact information) to whom Preferred Freezer offered the Release Agreement so that Gonzalez may personally "correct the damage wrought by [Preferred Freezer]'s misleading, unilateral communications." (Mot. 25.) This is reasonable in light of similar decisions from other courts. Compare County of Santa Clara, 2010 WL 2724512, at *1 (granting motion for corrective action where defendant failed to provide a summary of plaintiff's complaint, plaintiffs' counsel contact information, and the current status of the case) with Eshelman v. OrthoClear Holdings, Inc., No. C 07-01429 JSW, 2007 WL 2572349, at *1 (N.D. Cal. 2007) (denying motion for corrective action where defendants informed plaintiffs' counsel of the offer for settlement, and the offer included the second amended complaint and apprised the putative class about the pending lawsuit).

Preferred Freezer is correct when it argues that the Supreme Court's policy regarding restrictive order is to "limit[] speech as little as possible, consistent with the rights of the parties under the circumstances." Gulf Oil Co. v. Bernard, 452 U.S. 89, 102 (1981); (Opp'n 3.) The Supreme Court has held that "[a]n order limiting communications between parties and potential class members should be based on a clear record and specific findings that reflect a weighing of the need for a limitation and the potential interference with the rights of the parties." Gulf Oil,452 U.S. at 101. But Gonzalez does not seek to limit communications between parties and potential class members; instead, Gonzalez seeks the "names and contact information of those individuals from whom Preferred Freezer has attempted to extract releases" so that he may increase the level of communication with potential class members to allow a full exchange of information. Gonzalez even acknowledges that "both sides may contact [potential plaintiffs] at this precertification stage in order to evaluate this case." (Mot. 13.) Gonzalez's request therefore does not implicate any policy concerns regarding limitations on speech.

Preferred Freezer also asserts that Gonzalez cannot obtain a corrective order to a § 216(b) collective action under the FLSA because Rule 23 does not apply to § 216(b) collective actions. (Opp'n 2.) This argument is flawed. While § 216(b) collective actions differ from a Rule 23 class action, courts still have authority to govern the conduct of counsel and parties in a § 216(b) collective action. Hoffman-La Roche Inc. v. Sperling, 493 U.S. 165, 171 (1989). Courts have "both the duty and the broad authority to exercise control over a class action and enter appropriate orders" governing the parties' conduct. Id.

Preferred Freezer then argues that even if Gonzalez could seek a corrective order, Preferred Freezer's actions were proper because the Department of Labor ("DOL") was supervising the payment of the unpaid overtime to its employees, and as a result, the waiver was valid. (Opp'n 4--6.) Preferred Freezer contends that it voluntarily audited its payroll with DOL's supervision and tried to remedy any miscomputation. (Opp'n 4.) But the Court here is concerned not with the validity of the waivers but with Preferred Freezer's failure to provide sufficient information relating to Gonzalez's claims so that the employees could make an informed decision in accepting the waivers. Omission of important information relating to a plaintiff's case or claims is misleading. County of Santa Clara, 2010 WL 2724512, at *4. Although Preferred Freezer disclosed that a previous employee brought a suit against it for unpaid overtime, it omitted other relevant information that would give its employees sufficient notice of Gonzalez's suit. (Mot. 6--7.)

Nevertheless, Preferred Freezer argues that it provided enough information to its employees based on Alex Gamez's actions after receiving Preferred Freezer's offer for settlement. (Opp'n 19.) In early August 2012, Preferred Freezer offered a settlement to Alex Gamez while he was still a Preferred Freezer employee, but Gamez rejected the settlement. (Id.) Gonzalez's counsel learned that Preferred Freezer was offering the Release Agreement to potential plaintiffs after Gamez contacted Gonzalez's counsel regarding the Agreement. (Mot. 1.) Preferred Freezer asserts that because Gamez was able to contact Gonzalez's counsel subsequently then it shows that the waiver provided sufficient information without misleading the recipients. (Id.)

Even though Gamez was offered the settlement, rejected it, and contacted Gonzalez's counsel, this does not mean that every employee who received the settlement was sufficiently informed. (Opp'n 19.) Gamez's actions do not necessarily represent other potential plaintiffs' actions or knowledge. For example, Gamez could have known Gonzalez through their employment at Preferred Freezer and spoken with Gonzalez about the lawsuit, either through happenstance or from personal knowledge that Gonzalez had filed suit. Whatever the case, Gonzalez should have the opportunity to contact other potential plaintiffs to ensure that these employees are fully informed of the Gonzalez's lawsuit in order to make a fully informed decision whether to accept or reject the settlement.

In response to Preferred Freezer's misleading contact with putative class members in this action, Gonzalez asks that the Court orders Preferred Freezer to provide names, addresses, and telephone numbers for each and every person contacted by Preferred Freezer regarding the waiver. (Mot. 25.) Gonzalez also requests that any communication to potential plaintiffs should include all the important information relating to Gonzalez's case. (Mot. 24.) For the reasons discussed above, the Court finds this request reasonable and therefore GRANTS Gonzalez's motion.

Preferred Freezer is therefore ORDERED to provide Gonzalez with the contact information of all of those prospective plaintiffs in this case with whom Preferred Freezer has had contact regarding settlement. Furthermore, any communication that either party has with putative plaintiffs must include the following information: (1) the name of this case; (2) the case number; (3) a summary of the basis of Gonzalez's claims; (4) the name of Gonzalez's attorneys and their contact information; and (5) a statement concerning the effect of executing Preferred Freezer's released documents will have on its employees' ability to participate in this lawsuit.


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